2007 | Dalal Street

Equity Research

Buy Nitin Fire Protection – Kotak Research

July 16, 20072 min read

Kotak Securities has put a BUY recommendation on Nitin Fire and Industries. Nitin Fire Protection Industries Ltd (NFPIL) is India’s leading player in the fire protection, safety, security and intelligent building management systems.

The company is setting up a 500,000 cylinders per annum capacity plant to manufacture high-pressure seamless gas cylinders for both industrial and CNG applications at its Visakhapatnam SEZ. Traditionally, the demand for cylinders grew in India due to industrial, medical fire fighting and beverages segment. Going forward, we expect major growth in demand for cylinders to come from the automobile segment. The use of CNG as an auto fuel is also rising at a rapid pace in neighboring countries like Iran, Pakistan, and Malaysia among others.

The Indian fire protection industry, as a whole, is approximately valued at Rs.20 bn. It is expected to record double-digit growth rates in future. At the current price of Rs.431, the stock is trading at very attractive valuations of 10.5x FY09E earnings and 8.8x FY09E cash earnings. The stock is available at 7.9x EV/EBIDTA multiple and 1.5x EV/sales multiple based on FY09E estimates. Kotak expects the company to report RoE of 34.4% in FY09E. Kotak Sec initiates a BUY recommendation on NFPIL with a price target of Rs.650 over a 12-month horizon, based on the DCF method of valuation.

Breaking Corporate India Earnings News

Jaiprakash Associates Up on good Q1 numbers

July 16, 20071 min read

Jaiprakash Associates posted 54.34% rise in net profit to Rs 140 crore in the Q1 June 2007 compared to Rs 92 crore in Q1 June 2006. Total income increased 8.76% to Rs 1,005 crore in Q1 June 2007 compared to Rs 924 crore in Q1 June 2006.

A few month back, Reserve Bank of India (RBI) had allowed foreign institutional investors (FIIs) to buy equity shares and convertible debentures of Jaiprakash Associates up to 45% of its paid-up capital.

The current market price of Rs 873.10 discounts its FY 2007 EPS of Rs 18.9, by a PE multiple of 46.19.

Economy, Markets and Macro Views

Citi Us BHEL Target Price

July 13, 20071 min read

In a research report released just a while ago, Citigroup has revised the target price for BHEL to Rs 1,923 from Rs 1,672.

India’s generation capacity additions are set to move from a 5GW/year over the last five years to a 14GW/year over the next five years. As the generation capacity addition opportunity grows in size, BHEL could make do with a 50–60% market share vis-a-vis the earlier 65 -70% market share to meet its growth target of 20% sales CAGR over the next five years.

BHEL is our top Indian electric equipment pick. Citi Increases target price to Rs1,923 (from Rs1,672 earlier) as we increase our target P/E multiple to 23x FY09E (20x FY09E earlier) on par with other Indian capital goods majors (L&T/ Suzlon). Our target multiple is well supported by EPS CAGR of 27% over FY07-10E with RoEs in the 25–30% range.

BHEL is expected to report a fully diluted EPS of Rs 66.33 and Rs 83.61 for FY2008 and FY2009 respectively.

Breaking Corporate India Earnings News

Larsen & Toubro bags contracts worth Rs 853 crore + Stock Jumps

July 13, 20072 min read

Larsen & Toubro has bagged contracts worth Rs 853 crore.

The company has secured an order valued at Rs 366 crore from the Abu Dhabi Water & Electricity Authority for design, supply installation and commissioning of the two 132/22 kV substations at Saadiyat Island, Abu Dhabi. Each Substation consists of 132 V gas insulated switchgear 22 kV gas insulated switchgear 63/80MVA 132/22 kV transformers, substation control & monitoring system, protection & telecommunication system, DC system & auxiliaries and substations. The contract will be completed within 18 months.

The company has secured another order for turnkey construction at 400/220 kV extra high voltage substations valued at Rs 200 crore from the Power Grid Corporation of India. One of these major substation is to be located at Gurgaon (Near Delhi) will be 400/220 kV gas insulated substations. The other air insulation substations will be located at Bhinmal and Kankroli in Rajasthan and Zerda in Gujarat. The scope of work includes supply, erection testing & commissioning of 315 MVA transformers, 400 kV reactors, substation automation & protection system and total civil & air-conditioning works.

ECC (company’s construction division) water and utilities group has also bagged three orders valued at Rs 287 crore.

The scrip had hit a high of Rs 2,450 today, which is also its all-time high, and a low of Rs 2,400 so far during the day. It had touched a 52 week low of Rs 978.50 on 24 July 2006.

Equity Research

BUY Chennai Petroleum – Citi

July 12, 20071 min read

Citigroup in a report released a while ago has maintained BUY rating on Chennai Petroleum Corp Ltd [CPCL] with target price of Rs 360.

Citi maintained Buy/Low Risk (1L) rating on CPCL with a target price of Rs 360. CPCL looks well positioned to capitalize on the sustained upturn in refining margins. In this context, CPCL’s capacity expansion by 40% (up from 7.5MTPA to 10.5MTPA) and increased complexity appear timely.

Citi raised FY08-09 estimates by 19- 25% on the back of sustained strength in the refining cycle and reduced chances of subsidy burden. Introducing FY10E. The new target of Rs 360 is based on EV/EBITDA of 5.5x mid-FY09E, at the high end of its historical trading range but at a meaningful discount to peers (6.0-7.0x). Dividend yield of 5.6% provides downside support.

Economy, Markets and Macro Views

Aban Offshore gains as HEPI extends contract

July 12, 20071 min read

Aban Offshore announced today, 12 July 2007, during market hours that Hardy Exploration & Production (India) Inc (HEPI) has extended the contract for utilization of floating production unit Tahara Japan for a further period of 2 years with effect from 28 July 2007. The revenues estimated during the extended period amounts to $63.875 million, the company said.

The scrip had hit a high of Rs 3135 and a low of Rs 3083 so far during the day. It touched an all time high of Rs 3144 on 2 July 2007. It had hit a 52-week low of Rs 854.25 on 24 July 2006.

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